in the income tax appellate tribunal delhi · pdf filedelhi bench “f” new delhi...

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH “F” NEW DELHI

BEFORE SHRI R.P. TOLANI AND SHRI J.S. REDDY

ITA Nos. 1443/Del/2012 &5243/Del/2011

Asstt. Yrs. 2006-07 & 2008-09

Convergys Customer Management Vs. Asstt. Director of Income-tax,

Group Inc. 201, East Fourth Street, Cir. 1(1), International Taxation

Cincinnati, Ohio 45202 USA New Delhi.

C/0 Price Water Coopers House

11A, Vishnu Digamber Marg,

Sucheta Bhawan, New Delhi-110002.

PAN: AACCC 8989 M

AND

ITA No. 1376/Del/2012

Asstt. Yr. 2006-07

Asstt. Director of Income-tax, Vs. Convergys Customer Management

Cir. 1(1), International Taxation Group Inc. 201, East Fourth Street,

New Delhi. Cincinnati, Ohio 45202 USA

( Appellant ) ( Respondent )

Assessee by : S/Shri Pawan Kumar, Sachin Garg &

Mudit Sharma CAs

Department by : Shri D.K. Gupta CIT (DR)

O R D E R

PER R.P. TOLANI, J.M::

This is a set of three appeals – cross appeals for A.Y. 2006-07 against

the order of CIT(A) dated 24-1-2012; and assessee’s appeal for A.Y. 2008-

09 against the order of assessing officer passed with directions of DRP u/s

http://www.itatonline.org

ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12

Convergys Customer Management Group Inc. 2

143(3) read with Sec. 144C dated 17-10-2011. Assessee and issues being

same, all the three appeals are being disposed of by this common order.

2. Respective grounds raised by the assessee and the department are as

under:

Assessee’s appeal for A.Y. 2006-07 (1443/Del/2012):

“1. That the Ld. CIT (Appeals) on the facts and in the

circumstances of the case and in law, erred in confirming the

order of the Ld. AO that the Appellant has a Permanent

Establishment (‘PE’) in India under Article 5 of the DTAA

between India and U.S.A.

1.1 That the Ld. CIT (Appeals), erred on facts and in law, in

upholding that the Appellant has a Fixed Place PE in India in

terms of Article 5(1) of the DTAA.


holding that the Appellant has a place of management in India

under Article 5(2)(a) of the DTAA.


not appreciating that the Appellant was only procuring services

from India and thus, falls within the exclusionary clause under

Article 5(3) of the DTAA.

2. That the Ld. CIT (Appeals) erred in facts and in law in

ignoring that no profits can be attributed to the alleged PE both

in terms of Article 7(4) of the DTAA and Explanation 1 to

section 9(1) of the Act as the Appellant was merely procuring

services from India.

3. That the Ld. CIT (Appeals) having accepted the

application of transfer pricing principles in determining the

profits attributable to the alleged PE, and having regard to the

functions, assets and risks already captured in the transfer

pricing analysis of the Indian associated enterprise, erred in not

appreciating that no further profits can be attributed to the

alleged PE of the Appellant in India.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


4. That the Ld. CIT (Appeals) erred on facts and in law, in

upholding attribution of profits to the alleged PE of the

Appellant to the extent of Rs. 43,10,86,460.

4.1 That without prejudice to the Appellant’s contention that

it does not have a PE in India and no further profits are

attributable to the alleged PE, the profit attribution made by the

Ld. CIT (Appeals) is highly excessive and without any basis.

4.2 That the Ld. CIT (Appeals) erred in not appreciating the

Functions, Asset and Risk (FAR) profile of the Appellant, the

alleged PE and the Indian Associated Enterprise, in relation to

the India operations; thereby incorrectly computing the profit

attribution to the alleged PE.

4.3 That for attributing profits to the alleged PE, the Ld. CIT

(Appeals) ought to have considered only the revenue

attributable to the alleged PE instead of considering the end-

customer revenue of the Appellant.

4.4 That the Ld. CIT (Appeals) further, erred in facts and in

law by invoking the provisions of section 44C of the Act with

regard to cost incurred outside India and restricting the

deduction for selling expenses to Rs.58,69,62,170 and

executive and general administrative expenses to

Rs.2,26,88,761.

4.5 That the Ld. CIT (Appeals) erred in facts and in law in

not allowing deduction for other expenses incurred outside

India such as research and development costs, depreciation,

amortization etc for calculating the profits attributable to the

alleged PE.

5. That the Ld. CIT (Appeals) has erred on facts and in law

in upholding that the PeopleSoft license cost and maintenance

charges amounting to Rs. 68,17,878 are taxable as “Royalty”

under the provisions of section 9 (1)(vi) of the Act and Article

12 of the DTAA.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


6. That the Ld. CIT (Appeals) erred on facts and in law in

upholding levy of interest under sections 234B and 234D of the

Act and withdrawal of interest under section 244A of the Act.

Revenue’s appeal for A.Y. 2006-07 (1376/Del/2012):

“1. On the facts and in the circumstances of the case, the Ld.

CIT (A) has erred in reducing the additions figure made by the

AO on account of selling cost pertaining to Indian operations,

profits earned by the assessee from Indian operations and

attribution of total profit to the PE in India, by adopting the

amount of revenue earned globally shown by the assessee,

without appreciating the reasons and ignoring the findings of

the AO.

2. On the facts and in the circumstances of the case, the Ld.

CIT (A) has erred in holding that the assessee did not have a

Dependent Agent Permanent Establishment in India through

Convergys India Services Pvt. Ltd. (CIS), despite of having

observed that the CIS did not have either economic

independence or functional independence.”

Assessee’s appeal for A.Y. 2008-09 (5243/Del/2011):

1. That on the facts and in the circumstances of the case &

in law, the order passed by the Ld. Assessing Officer under

section 143(3) read with section 144(C) of the Act is bad in law

and void ab-initio.

2. That on the facts and in circumstances of the case & in

law, the Ld. LD. AO erred in assessing the returned income of

appellant of Rs. 37,94,300 at Rs. 50,71,14,396.

3. That on the facts & circumstances of the case & in law,

the Ld. DRP erred in confirming the draft order of the Ld. LD.

AO and conclusions contained therein.

4. That the Ld. LD. AO erred on facts & in law, in alleging

that the appellant has a Permanent Establishment (‘PE’) in India

in terms of the provisions of the Article 5 of the Double


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


Taxation Avoidance Agreement between India and United

States of America (‘DTAA’) without bringing any material on

record.

4.1. That the Ld. LD. AO, erred on facts & in law, in holding

that the Appellant has a Fixed Place PE in India in terms of

Article 5(1) and 5(2) of the DTAA.

4.2. The Ld. LD. AO, erred on facts & in law, in not

appreciating that the appellant was only procuring services from

India and was accordingly covered under the exclusionary

clause provided under Article 5(3) of the DTAA.


that the Appellant has Dependent Agent PE in terms of Article

5(4) and 5(5) of the DTAA.


that the Appellant has Service PE in terms of Article 5(2)(l) of

the DTAA.

5. That the Ld. LD. AO erred on facts & in law, in

attributing a sum of Rs. 45,51,71,917 as profits of the alleged

PE of the appellant in India on conjectures and surmises.

5.1. That the Ld. LD. AO erred in law in making the

impugned attribution/addition to the alleged PE without

referring the matter to the Transfer Pricing Officer which is in

complete contradiction to the Instruction No. 3 dated May 20,

2003 issued by the CBDT which was binding on the Ld. LD.

AO.

5.2. That the Ld. LD. AO erred in law in making the

impugned attribution/addition to the alleged PE without

following the transfer pricing principles which is in complete

inconsistency to the Circular No. 5 of 2004 dated September

28, 2004 issued by the CBDT which was binding on the Ld.

LD. AO.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


5.3. That the Ld. LD. AO having considered the PE Profit

Attribution Analysis Memo which was filed without prejudice

to the contention of the appellant that it does not have a PE in

India and contained a functions, assets and risks (FAR) analysis

of the alleged PE, erred in not accepting the Appellant’s

contention that based upon the same, nothing further was

required to be attributed to the alleged PE.

5.4. That the Ld. LD. AO failed to appreciate that attribution

of profits to the PE is a transfer pricing issue and grossly erred

on facts and in law in disregarding established judicial

pronouncements in India on the issue that once an arm's length

price has been determined for the Indian associated enterprise

[Convergys India Services Private Limited (CIS) in the present

case] which subsumes the functions, assets and risk profile of

the alleged PE, nothing further can be attributed to the PE.

5.5. Without prejudice to the ground that no PE exists, the

profit attribution made by the Ld. LD. AO to the alleged PE is

highly excessive and without any basis.

5.5.1. That for attributing profits to the alleged PE, the Ld. LD.

AO ought to have considered only the revenue attributable to

the alleged PE instead of considering the end-customer revenue

of the appellant company.

5.5.2. That the Ld. LD. AO further, erred in facts & in law by

invoking the provisions of section 40(a)(i) and section 44C of

the Act with regard to cost incurred outside India thereby

restricting the allocation of expenses to USD 831,643 as against

the claim of allocated actual expenses of USD 33,824,353

incurred outside India.

6. That the Ld. LD. AO, erred on facts and in law, in

making an addition of Rs. 4,81,48,179 paid on account of

International Private Leased Circuit (IPLC) charges by stating

that they are taxable as ‘Equipment Royalty’ in terms of Article

12(2) read with Article 12(3)(b) of the DTAA.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


7. That the Ld. LD. AO erred on facts and in law in

withdrawing interest under section 244A of the Act and levying

interest under sections 234B of the Act.

3. Brief facts are: The assessee i.e. Convergys Customer Management

Group Inc. ( ‘CCMG’) is a company incorporated in the United States of

America and claims itself a tax resident of USA under Article 4 of the India

– US Double Taxation Avoidance Agreement (‘DTAA’). The Appellant

provides IT enabled customer management services by utilizing its advanced

information system capabilities, human resource management skills and

industry experience.

3.1. The Appellant has a subsidiary in India by the name of Convergys

India Services Pvt. Ltd. (hereinafter referred to as “CIS”). To service its

customers, the Appellant claims to procure services from India on a principal

to principal basis from CIS. The Appellant does not carry out any business

operations in India. CIS provides IT enabled call centre/back office support

services to the Appellant. It is claimed that substantial risk of procurement

of services by the Appellant from CIS lies with the Appellant like, market

risks, price risks, R&D risk, service liability risk towards its customers for

quality and efficiency in delivery of services. Appellant claims that its

customers are outside India, aforesaid risk resides outside India.

3.2. In its return for A.Y. 2006-07 the Appellant declared a total income of

Rs. 4,00,06,350 comprising of Rs. 1,92,29,077 as interest on external

commercial borrowings and an amount of Rs. 2,07,77,272 as fees for

included services. The interest and service income was earned by the

Appellant from CIS. The interest income was offered to tax @15% on gross

basis in accordance with Article 11 of the DTAA and the service income was

also offered to tax @15% on gross basis in terms of Article 12(4)(b) of the


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


DTAA. Certain reimbursements made by CIS in the nature of link charges,

software payments etc. were not offered for taxation since it claimed that

they were not subject to tax in India in accordance with the provisions of the

DTAA.

3.3. AO by assessment order dated December 29, 2008 determined the

taxable income at Rs. 294,46,73,964 against the declared income of Rs.

4,00,06,350. It was held by AO that the Appellant has various forms of

Permanent Establishment(‘PE’) in India as under:

(i) Fixed Place PE :

a. Fixed Place PE under paragraph 1 of Article 5 of the DTAA

b. An Office under paragraph 2(c) of Article 5 of the DTAA

c. A Factory under paragraph 2(d) of Article 5 of the DTAA

(ii) Service PE under paragraph 2(l) of Article 5 of the DTAA .

(iii) Dependent Agent PE (DAPE) under paragraph 4(a) and 4(c)

read with paragraph 5 of Article 5 of the DTAA.

3.4. After coming to the conclusion that the Appellant has a PE in India,

the Ld. AO has computed profits of Rs. 2,84,45,67,544 as attributable to the

alleged PE in India by further estimating the revenue from Indian operations

at Rs. 12,15,81,77,391 by allocating the global revenue in proportion of

number of employees, as against the actual revenue of Rs. 6,19,73,70,750/-.

Actual revenue figure has been accepted by the CIT(A) after giving a proper

opportunity of hearing to the AO). Further, the AO also allocated expenses

(excluding direct expenses) in proportion of number of employees. Assessee

claims that if the methodology adopted by the AO is followed by taking the

correct/ actual revenue as accepted by the Ld. CIT(A) i.e. of Rs.

6,19,73,70,750 as the starting point, it will result in a loss in the hands of the

alleged PE.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


3.5. Further the AO held the PeopleSoft license cost / maintenance

charges are taxable as “Royalty” under the provisions section 9(1)(vi) of the

Act and Article 12 of the DTAA.

3.6. AO also held the IPLC/link charges are taxable as “Equipment

Royalty” in terms of clause (iva) of Explanation 2 to section 9(1)(vi) of the

Act and Article 12(2) read with Article 12(3) (b) of the DTAA.

3.7. By above observations, the assessed income was computed by the AO

as under:

S.

No.

Particulars Amount

(in Rs.)

(i) Returned Income (Taxable @ 15%) 4,00,06,350

(ii) Profits attributable to alleged PE (Taxable @ 40%

plus applicable surcharge and cess)

2,84,45,67,544

(iii) People-soft charges (Taxable as Royalty @ 15%) 68,17,878

(iv) IPLC Charges (Taxable as Equipment Royalty @

10%)

5,32,82,192

Total 2,94,46,73,964

3.8. Being aggrieved by the AO’s order, the appellant filed a writ petition

with the Hon’ble High Court of Delhi for stay of demand. The Hon’ble High

Court disposed off the writ petition on May 20, 2011 directing the assessee

to file an appeal with the CIT (A), accordingly, the appeal was filed with the

CIT (A).

3.9. In the order passed by the CIT (A), partial relief has been allowed to

the Appellant. The Ld. CIT (A) held as under:


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


(i) Permanent Establishment

a) The Ld. CIT (A) while confirming the order of the Ld.

AO held that the Appellant has a Fixed Place PE in India

under article 5(1) of the DTAA and a place of

management under Article 5(2)(a) of the DTAA.

b) The Ld. CIT (A) accepted the contention of the Appellant

and held that it does not have a Service PE in India in

terms of Article 5(2)(l) of the DTAA as the services are in

the nature of included services covered under Article 12

of the DTAA.

c) The Ld. CIT (A) accepted the contention of the Appellant

and held that it does not have a Dependent Agent PE in

India as none of the conditions mentioned in Article 5(4)

are satisfied.

(ii) Profit attribution to PE - In connection with profit attribution to

the PE, the Ld. CIT (A) recomputed and reduced the amount of

profits attribution from Rs. 2,84,45,67,544 to Rs. 43,10,86,460.

(iii) People Soft charges - The Ld. CIT (A) affirmed the order of

the Ld. AO and held that the PeopleSoft license cost and

maintenance charges received by Appellant are in the nature of

Royalty in terms of section 9(1)(vi) of the Act and Article 12 of the

DTAA and hence taxable @15% on gross basis. CIT (A) relied on

the judgement of Karnataka High Court in the case of Samsung

Electronics Co. Ltd. 203 Taxman 477 in his order.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


(iv) IPLC charges - The Ld. CIT (A) deleted the addition made by

the Ld. AO and held that the payments for International Private

Leased Circuits (‘IPLC’) charges do not constitute Royalty in

terms of provisions of Article 12 of the DTAA as the third party

service provider was merely using its own equipment itself while

rendering the services to its customers including the Appellant and

CIS and there is no transfer of right to use, either to the Appellant

or CIS.

(v) Interest under section 234B - The Ld. CIT (A) has held that

except for the payment with regard to PeopleSoft charges made by

CIS, the income of CMG was not liable for withholding under

section 195 of the Act and therefore CMG was liable to pay

advance tax on its business income (i.e. profits attributed to PE)

and consequentially liable to pay interest under section 234B of the

Act.

3.10. Aggrieved with the order of the CIT (A), both assessee and revenue

have preferred appeals before the ITAT. The revenue has not challenged the

order of the CIT (A) holding that assessee has no Service PE. Thus, the

revenue has accepted that CMG does not have a Service PE in India.

4. In this factual backdrop, ld. Counsel for the assessee Shri Pawan

Kumar CA adverted to following issues:

A. Appellant does not have a Fixed Place PE in terms of Article

5(1) and Article 5(2) of the DTAA

Factual Submissions:


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


4.1. The Ld. AO in his order has alleged that the Appellant has a Fixed

Place PE in India in terms of Article 5(1) and Article 5(2) of the DTAA on

the basis of the following:

- Employees seconded by CMG to CIS and the visiting

employees of CMG had a fixed place of business at their

disposal in the form of the facilities and premises of CIS.

- Seconded employees of CMG to CIS were working on key

positions such as Country Head and Managing Director of CIS.

- CMG has borne revenue expenses incurred for setting up of

various call sites (pre-operative expenses), capital costs were

borne by CIS itself.

- CMG has provided free of cost assets in India for use of CIS.

- CMG has provided free of cost access to gateways,

communication lines etc outside India to CIS.

- CMG has provided free of cost software to CIS for its use.

4.2. The Ld. CIT (A) in his order has upheld that the assessee has a Fixed

Place PE in India in terms of Article 5(1) of the DTAA by stating that the

premises of CIS were at the disposal of CMG and the business of CMG was

carried on from such place and following other observations:-

(i) CIS did not have either economic independence or functional

independence in relation to functions carried on by it due to the

following:

a. entire pre-operative expenses for setting up the call centre

sites for CIS were borne by the Appellant,


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


b. entire capital was provided to CIS in the form of share

capital/loan by the Appellant to start its operation in India,

c. CMG exercised substantial control and influence in the

functional matters as is evident from the frequent and

extensive visits of Appellant’s employees to India,

secondment of Appellant’s employees to the key position in

CIS,

d. CIS did not bear any substantial risk in relation to the

functions carried out by in India and,

e. Deployment of certain assets (hardware and software)

without charging any cost.

(ii) Management of risk related to delivery of services was carried

out in India by CMG through its employees visiting India on

frequent basis or secondment of its employees on key positions

in CIS.

(iii) The entrepreneurial services were performed in India by CMG

through the frequent visits of its employees to provide

supervision, direction and control over the operations of CIS

and such employees had a fixed place of business at their

disposal.

(iv) The Ld. CIT (A) has held that the appellant had a place of

management in India under Article 5(2)(a) of the DTAA.

Legal Submission:

4.3. Article 5.1 of the DTAA defines that the term ‘permanent

establishment’ to mean a fixed place of business through which the business


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


of an enterprise is wholly or partly carried on. Thus, the conditions so

prescribed under Article 5(1) are as follows:

- There must be a place of business;

- The place of business must be fixed; and

- The business of the enterprise must be carried on through that

place of business.

4.4. In view of these propositions, one of the basic conditions to be

satisfied before a PE can come into existence is that the foreign enterprise

must have a place of business in the other country. The concept of a place of

business envisages the following:

- A facility such as a premise which is used for carrying on the

business of the enterprise; and

- Such facility must be at the constant disposal of the enterprise.

In other words, the place of business (facility) must be at the foreign

enterprise’s ‘disposal’ before such enterprise could be said to create a

PE situation.

4.5. The scope of above Article was examined by the coordinate bench in

the case of SAIL vs. ACIT [2006] 301 ITR 235, wherein the Bench at Para 7

observed as under:

“We may also examine the provision contained in para 1 of

article 5, which defines PE to mean a fixed place of business

through which the business of an enterprise is wholly or partly

carried on. On the basis of para 1 it can be inferred that fixed

place of business should be that of the assessee. It may be

owned, rented out to the assessee or the assessee might have

obtained facility by way of license to carry out business from

that fixed place. But, the assessee should have some kind of

domain or control over the place for conduct of his business

either or wholly or partly.”


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


4.6. Similarly, in the case of Ericsson Radio Systems A.B. vs DCIT 96 TTJ

1 [Del SB], ITAT Special Bench held as under:

“The OECD commentary on Double Taxation refers to a "fixed

place" as a link between the place of business and a specific

geographical point. It has to have a certain degree of

permanency. It is emphasized that to constitute a "fixed place of

business", the foreign enterprise must have at its disposal

certain premises or a part thereof. Phillip Baker in his

Commentary on Double Taxation Conventions and

International Tax Law (3rd edition) states that the nature of the

fixed place of business is very much that of a physical location,

i.e. one must be able to point to a physical location at the

disposal of the enterprise through which the business is carried

on…”

The above order of the Special Bench has been confirmed by the

Hon’ble Delhi High Court.

4.7. Reference is also made to the decision of the Andhra Pradesh High

Court in the case of CIT vs. Vishakahapatnam Port Trust 144 ITR 146, in

which it was held that the PE postulates the existence of a substantial

element of an enduring or permanent nature of a foreign enterprise in

another country which can be attributed to a fixed place of business in that

country. It should be of such a nature that it would amount to a virtual

projection of the foreign enterprise of one country into the soil of another

country.

4.8. Further, the OECD Model Convention provides that in order to

constitute a fixed place PE, there should be a distinct situs "in India in

instant case" and that the word "fixed" refers to a distinct place with a


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


certain degree of permanence. It further provides that the foreign enterprise

should be able to walk into the place of its own right and not by permission.

4.9. Further, DTAA also recognizes that mere fact that a company of one

Contracting State controls or controlled by a company which is a resident of

the Other Contracting State, the relationship per se shall not by itself result

in a PE of either company.

4.10. Reference in this regard is made to Paragraph 40 of the OECD

Commentary which provides that it is generally accepted that the existence

of a subsidiary company does not by itself, constitute that subsidiary

company a permanent establishment of its parent company. The relevant

extract is given below:

“40. It is generally accepted that the existence of a subsidiary

company does not, of itself, constitute that subsidiary company

a permanent establishment of its parent company. This follows

from the principle that, for the purpose of taxation, such a

subsidiary company constitutes an independent legal entity.

Even the fact that the trade or business carried on by the

subsidiary company is managed by the parent company does

not constitute the subsidiary company a permanent

establishment of the parent company.”

4.11. According to ld. Counsel, the unambiguous position which emerges

from the perusal of foregoings is that the existence of a subsidiary does not,

by itself, constitute that subsidiary company is a PE of its parent company.

The PE can be constituted only if any space or premises belonging to the

subsidiary or other entity is at the disposal of the parent company from

where the parent company carries on its business.

4.12. Article 5(2) only lists down the examples which can prima-facie

constitute a PE. Even the OECD Commentary provides that the list is only


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


illustrative and the place of business will only constitute a PE only when the

requirements of Article 5(1) are satisfied.

4.13. It is submitted that the allegations made by the Ld. AO/Ld. CIT (A)

that people who were on assignment with CIS were employees of the

assessee and were looking after the business of CMG in India are based on

surmises and conjectures. Reliance is placed on the judgment of ITAT,

Mumbai in the case of DDIT (International Taxation) vs. Tekmark Global

Solutions LLC (2010) 131 TTJ 173, wherein the ITAT observed as under:

8. ... The deputed persons are for all practical purposes employees of

the Indian company. They carry out work allotted to them by the

Indian company. Assessee has no control over the activities or the

work to be performed by the deputed persons. Indian company has a

right to remove the deputed persons from the services. What the

assessee recovered was the actual salary payable to the deputed

persons.... When the services rendered are independent of and not

under the control of the assessee, the deputed persons cannot be

considered as constituting a PE of the assessee in India. Hence there

is no PE of the assessee in India. The actual salary of the deputed

personnel reimbursed by the Indian company is only reimbursement

of salary payable by the Indian company advanced by the assessee to

the employees.

4.14. The provision of assets and software free of cost by CMG to CIS

cannot lead to the conclusion that CMG was carrying on business in India.

The ITAT Delhi in the case of Western Union Financial Services Inc Vs.

ADIT (101 TTJ 56 has analysed whether the software provided by the US

tax resident to its Indian representative/agent can create a PE in India under

the India-USDTAA. In this case, the assessee (a non-resident company)

registered in USA was engaged in the business of rendering money transfer

services. The business included transfer of monies across international

borders. In this regard, the Liaison Office of the assessee in India provided


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


the management software (VOYAGER) to the agents free of cost and trained

their staff on the usage and versatility thereof. In this background, the ITAT

held as under:

(c) Is the software "VOYAGER" the PE of the assessee?

The department has made out a case that the software, which

affords access to the agents to the assessee's mainframe

computers in USA for the purpose of finding out the matching

of the MTCN numbers, has been installed in the premises of the

agents and hence taken together with the premises constitutes

the PE. The premises of the agents are either owned or hired by

them. There is no evidence to show that the assessee can as a

matter of right enter and make use of the premises for the

purpose of its business. The software is the property of the

assessee and it has not parted with its copyright therein in

favour of the agents. The agents have only been allowed the use

of the software in order to gain access to the mainframe

computers in the USA. Mere use of the software for the purpose

from the premises of the agents cannot in our opinion lead to

the decision that the premises-cum-software will be the PE of

the assessee in India.

4.15. This view finds support from the OECD Commentary also wherein it

has been clarified that:

“If an enterprise of a State lets or leases facilities, ICS

equipment, buildings or intangible property to an enterprise of

the other State without maintaining for such letting or leasing

activity a fixed place of business in the other State, the leased

facility, ICS equipment, building or intangible property, as

such, will not constitute a permanent establishment of the lessor

provided the contract is limited to the mere leasing of the ICS

equipment, etc.”

4.16. Reliance is also placed on the following in support of the contention

that mere provision of the assets and software cannot create PE of the

foreign enterprise in India:

- Airline Rotables [(2010) 131 TTJ 385] (ITAT, Mumbai)


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


- DDIT v. Nederlandsche Overzee Baggermaatschappiji BV.

[2010-TII-78-ITAT-MUM-INTL] (ITAT, Mumbai)

4.17. In view of the above factual and legal submissions, Shri Pawan

Kumar pleads that CMG could not be said to have a PE in terms of Article

5(1) & 5(2) of the DTAA.

B: Appellant was merely engaged in procuring services from India

and would therefore fall within the exclusionary clause of Article 5(3)

of the DTAA

4.18. The Ld CIT (A) failed to appreciate that the Company is merely

engaged in procuring services from India and its activities are accordingly

covered by clause (d) of paragraph 3 of Article 5 of DTAA which excludes

“the maintenance of a fixed place of business solely for the purpose of

purchasing goods or merchandise, or of collecting information, for the

foreign enterprise” from being regarded as PE.

4.19. It is further submitted that procurement of services is akin to

purchasing goods or merchandise. In this regard, we draw your attention to

the decision of the Supreme Court in the case of Commissioner of Income

Tax vs. B. Suresh 313 ITR 149 (SC), wherein the Apex Court observed that

today the difference between “goods” and “services” is getting blurred with

the globalisation and cross-border transactions. Accordingly, with

technological advancement one has to change our thinking regarding

concepts like goods, merchandise and articles.

4.20. In view of the above, notwithstanding the provisions of Article 5(1)

and 5(2) of DTAA, even maintaining a fixed place of business in India

merely for the purposes of purchasing/procuring services will not create a

PE of CMG in India.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


C: Appellant does not have any Dependent Agent PE in terms of

Article 5(4) and 5(5) of the DTAA

Legal Submission :

4.21. Article 5(4) of the DTAA specifically precludes an agent of

independent status from being considered as a PE. Article 5(5) provides

that a person is considered to be an agent of independent agent when:

- He is an agent of independent status;

- He acts in the ordinary course of its business

However, such an agent would not be considered an agent of

independent status:

- Where activities of the agent are devoted wholly or almost

wholly on behalf of the principal; and

- The transaction between the agent and the principal are not

made under arm’s length price.

4.22. Thus, if an agent is of independent status, recourse to Para 4 is not

available to the department as that para will apply only where the person

carrying on business for the non-resident principal is one other than an agent

of independent status referred to in Para 5. Further, the allegation that the

activities of CIS are devoted “wholly or almost wholly” cannot be read

without the condition of transaction being at Arm’s Length.

4.23. Further, merely because an agent does not satisfy the test embodied in

Paragraph 5, he does not per se become a deemed PE under Paragraph 4. In

order to do so, the activities of such an agent should fall under at least one of

the following three clauses, clauses (a) to (c), of Paragraph 4, as listed

below:


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


(a) The dependent agent has and habitually exercises in India an

authority to conclude contracts on behalf of the foreign

enterprise; or

(b) The dependent agent has no such authority but habitually

maintains in India a stock of goods or merchandise from which

he regularly delivers goods or merchandise on behalf of the

foreign enterprise, and some additional activities conducted in

India on behalf of the foreign enterprise have contributed to the

sale of the goods or merchandise ; or

(c) The dependent agent habitually secures orders in India, wholly

or almost wholly for the enterprise.

4.24. Reliance in this regard is placed on the AAR ruling in the case of

TVM Ltd. 237 ITR 230, wherein it was held that merely because the agent is

not independent would not automatically create an agency PE. The agent

should be able to exercise the authority to conclude contracts.

4.25. In the present case, the above elements of authority to conclude

contracts or secure orders do not exist in activities performed by CIS. It is

CMG that is responsible for negotiating prices and entering into contracts

with the end customers. The only assistance that CIS may provide CMG in

this regard is intermittent inputs from an India perspective like USP, skill

sets, and comparative advantage of choosing India as a base for outsourcing

services etc. Even the Ld. AO has not brought any material on record to

demonstrate that CIS had any authority whatsoever to conclude contracts or

secure orders on behalf of the assessee. It is merely an allegation without

any basis.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


4.26. In the light of above, even assuming, CIS is an agent of CMG, it does

not have any authority to conclude contracts or secure orders on behalf of

CMG and hence CMG does not have a Dependent Agent PE in India.

5. Attribution of profits for Indian operations:

5.1. During the course of assessment proceedings, the details of aggregate

customer revenue from the work subcontracted to CIS and estimated

operating income of the appellant with respect to such revenue were

submitted before the AO. The estimated operating income was computed by

assessee considering the global operating income percentage of the customer

care business came to 10.55%, this was explained in following tabular

format:

Description Amount in

USD million

End-customer revenue with regard to contracts/ projects

where services are procured from CIS (A)

138.9

Service fee paid to CIS (inclusive of mark-up of USD

13.8 million) (B)

112.5

Balance retained by CMG (C = A - B ) 26.4

Expenses incurred in U.S. by CMG (D) 25.6

Profit retained by CMG for functions performed, assets

utilised and risks borne in the US (E = C - D)

0.8

(Amount in USD million)

Description India US Consolidated

Revenue (A) 112.5 26.4 138.9

Expenses (B) 98.7 25.6 124.3

Profit (C = A – B) 13.8 0.8 14.6

5.1.1. These details are submitted to AO/ TPO and are not adversely

commented upon. TPO has adopted a totally realistic and unreasonable

method.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


5.2. The assessing officer rejected this information and adopted a head

count basis for attributing profits of Rs. 2,84,45,67,544/- by allocating

revenue and expenses (excluding direct expenses) in proportion of number

of employees assuming that each employee delivers same value to the

revenue earned by the appellant to the alleged PE of the appellant in India.

This computation of profit attribution by the assessing officer in complete

disregard of the provisions of law, arbitrary and without any basis and leads

to following distorted results:

Description

Number of employees during the year in CMG – based on the

calendar year information reported in the annual report proportioned

for Indian FY 2005-06 (A)

61,050

Number of employees during the year in CIS – approximate number

taken based on internet report for 2004 and 2007 (B)

10,000

Total revenue of CMG for the year (as per annual report) (USD)

(C )

1,66,36,00,000

Total revenue per employee (USD) (D=C/A) 27,250

Revenue generated by Indian employees (USD) (B * D) 27,24,97,952

Revenue generated by Indian employees (INR) (E = B * D

*44.6175 )

12,15,81,77,391

Cost of products and services taken to be total cost of CIS (F) 4,34,53,89,490

Allocation of other expenses (SG&A, R&D, Depreciation,

Amortization) – global expenses proportioned in the ratio of

employees (G)

3,01,52,06,032

Net profit due to Indian Operations (H= E-(F+G)) 4,79,75,81,869

Ratio of costs of products & services to total cost considered to be

attributable to India

72.77%

Profit attributable to Indian operations (I = H * 72.77%) 3,49,12,00,326

Profit before Tax of CIS (J) 64,66,32,792


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


Profit belonging to the PE (I – J) 2,84,45,67,534

5.3. The following table shows the computation of global expenses

proportioned in the ratio of employees:

Particulars 2006 2005 F.Y. 2005-06

Selling, general and administrative

expenses 335.8 308.2 315.1

Research and development costs 8.6 8.6 8.6

Depreciation 65.4 68.7 67.875

Amortization 4 10.7 9.025

Restructuring charges 6.5 13.8 11.975

Total expenses (Million USD) 412.575

Allocation of other expenses in (USD) (412.575

*10000/61050) (Rounded off) 67.579

Allocation of other expenses in (Rs.) (USD

67,579,000* Rs.44.6175) 3,01,52,06,032

-Computation of Ratio of costs of product and services to total cost

(Amount in USD million)

Particulars 2006 2005 F.Y. 2005-06

Costs of products and

services 1,180.4 1,077.2 1,103

Selling, general and

administrative expenses 335.8 308.2 315.1

Research and development

costs 8.6 8.6 8.6

Depreciation 65.4 68.7 67.875

Amortization 4 10.7 9.025

Restructuring charges 6.5 13.8 11.975

Total Costs and expenses (Million USD) 1,515.575

Ratio of Costs of products and services to total

cost (1,103/1515.575*100) 72.77%


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


5.4. The fundamental difference between the appellant and the AO’s

calculation lies at the starting point of the computation itself i.e. the revenue

which was considered on the basis of head count instead of the amount

submitted by the appellant i.e. USD 138.9 million representing the revenue

from end customers with regard to contracts/projects wherein services were

procured from CIS for AY 2006-07. If the methodology adopted by the AO

is followed by taking the revenue of USD 138.9 million as the starting point,

it will result in a loss in the hands of the alleged PE as explained through

computation below:

Particulars Assessment

order

Revised

numbers

Revenue generated by Indian employees

(USD)

27,24,97,952

13,89,00,000

Revenue generated by Indian employees

(INR) (A)

12,15,81,77,391

6,19,73,70,748

Cost of products and services taken to be

total cost of CIS (B)

4,34,53,89,490

4,34,53,89,490

Allocation of other expenses (SG&A,

R&D, Depreciation, Amortization) –

global expenses proportioned in the ratio

of revenue (C)

3,01,52,06,032

1,53,69,56,142

Net profit due to Indian Operations (D= A-

(B+C))

4,79,75,81,869

31,50,25,116

Ratio of costs of products & services to

total cost considered to be attributable to

India

72.77% 72.77%

Profit / (Loss) attributable to Indian

operations (E = D * 72.77%)

3,49,12,00,326

22,92,43,777

Profit before Tax of CIS (F)

64,66,32,792

64,66,32,792

Profit / (Loss) belonging to the PE (E – F)

2,84,45,67,534

(41,73,89,015)


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


5.5. In first appeal CIT(A) incorrectly held that Profit Split Method (PSM)

appears to be the most suitable method to determine the arm’s length profit

attributable to CMG’s PE in India. Without appreciating that the FAR

profile of alleged PE of CMG in India has to be limited to ‘additional

FAR/Cost’ if any deemed to be incurred for the purpose of carrying out the

India operations of service delivery and which are not already captured in

the FAR/Cost of CIT. It is pleaded that CMG or its employees do not

perform any entrepreneurial service to manage risk related to service

delivery in India. Further, neither CIS nor the alleged PE develops/ owns

any intangibles. It is contended that merely for attribution towards free of

cost assets and software by CMG, PSM is not the appropriate method for

computing the attribution in the instant case for the alleged PE.

5.6. CIT(A) though after hearing detailed arguments and verification,

accepted the revenue from end-customer with regard to contracts/projects

wherein services were procured from CIS of USD 138.9 million as

submitted by the appellant relying on the following:

(i) Customer-wise break-up of revenue earned from India

operations along with a management certificate and also an affidavit

from Director of the appellant.

(ii) Jurisdiction wise break-up of the global revenue.

(iii) Ledger extracts of top six customers.

(iv) Sample copy of contracts between appellant and its clients.

(v) Sample copy of invoices raised by the appellant on its clients.

(vi) Assessment order of assessment year 2008-09 wherein the

revenue of USD 184.6 million was accepted by the assessing officer.

5.7. Shri Pawan Kumar ld. counsel for assessee pleads that once the

revenue was accepted by the CIT(A) at USD 138.9 million the methodology


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


adopted by the assessing officer about expenses, ought to have been

followed. If this correct and reasonable method is adopted, it results in a loss

in the hands of the alleged PE. However, the CIT(A) computed profits

attributable to the alleged PE of the appellant in India by an unreasonable

method, as under:

Particulars Amount (Rs)

End – customer revenue from Indian operations (A) 6,19,73,70,750

Less: Amount paid to CIS (B) 4,98,68,34,000

Less: Selling cost allocated to Indian Operations

(USD 13.155 million * Rs. 44.6175) (C) (estimated

@ 50% of selling, general and administrative

expenses)

58,69,62,170

Profits earned from India operations (D = A-B-C) 62,35,74,580

Profits attributable to CMG’s PE in India (E =

D*72.77%)

45,37,75,221

Less: 5% of above for Head Office expenses under

section 44C of the Income Tax Act, 1961 (Act) (F =

E*5%)

2,26,88,761

Profits taxable in India (E-F) 43,10,86,460

5.8. The above computation of profit attribution made by the CIT(A) is

highly excessive as the starting point for computing the profits attributable to

a PE should be the arm’s length return/ remuneration of a PE based on the

FAR profile of the PE whereas the CIT(A) has considered the end-customer

revenue of the appellant. CIT(A) completely disregarded the transfer pricing

analysis report for PE attribution conducted by an independent expert for the

year under consideration and submitted during appeal.

5.9. Alternatively, it is submitted that the assessing officer has himself

arrived at a percentage of 72.77% which according to him represents the


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


proportion of functions performed in India. This has also been confirmed by

the CIT(A). Hence, applying this percentage on revenue earned by the

appellant with regard to contracts wherein services have been procured from

CIS, one would arrive at the arm’s length revenue of the alleged PE (i.e.

USD 101.08 million = 72.77% of USD 139.9 million). The correction of

this error would prove that no further attribution can be made as the amount

of service fee paid by CMG to CIS (i.e. USD 112.5) is more than this

amount. This can be explained as under:

Description Amount

(USD in

million)

Comments

Revenue [A] 101.08 [72.77% of USD

138.90 million i.e.

total end-customer

revenue]

Less: Amount of service fee

paid to CIS (including mark-

up) [B]

112.50 Already offered to tax

in India by CIS

Balance [C = A – B ] (11.42)

Profit attributable to India No further attribution required

5.10. CIT(A) for arriving at the revenue of the alleged PE of the appellant

has taken CMG revenue as the starting point. Hence, the Ld. CIT (A) should

also have considered the expenses incurred outside India for arriving at the

profit of the assessee with regard to the contracts wherein services have been

procured from CIS. While computing the profit of CMG, there is no

question of applying the provisions of the Act. The expenses incurred

outside India have been incurred by CMG for its business outside India and

not by the alleged PE. Hence, the Ld. CIT (A) erred in invoking the

provisions of section 44C of the Act with regard to cost incurred outside


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


India and restricting the selling expenses to Rs. 58,69,62,170 and executive

and general administrative expenses to Rs. 2,26,88,761 for attributing the

profits to the alleged PE in India.

5.11. Ld CIT (A) should have allowed all the expenses incurred outside

India such as Research and development expenditure, depreciation,

amortization etc. while computing he profits of CMG. The Ld CIT (A) erred

in allowing only 50% of the selling, general and administrative expenses and

ignoring the other expenses incurred by CMG outside India for earning the

revenue from end-customers.

5.12. The details and nature of expenses incurred by CMG outside India

which are allocable to the contracts wherein services have been procured

from CIS are submitted before the Ld. AO /Ld. DRP in the subsequent years

i.e AY 2007-08 and AY 2008-09. Following the same methodology for the

financial Year 2005-06, the detail of expenses aggregating to USD 25.69

million is enclosed as Annexure A with submissions. These expenses relate

to the activities undertaken by CMG outside India such as sales and

marketing, contract negotiation, customer relationship management,

provision of necessary networking/telecom infrastructure, technology,

project management, etc. By reducing the amount of such expenses

aggregating to USD 25.69 million from the end-customer revenue of USD

138.9 million, the balance amount comes to USD 113.30 million. However,

as CMG has already paid an amount of USD 112.50 million to CIS, profit of

only USD 0.8 million is retained by CMG. Out of this USD 0.8 million, an

amount of USD 0-46 million has been offered for taxation in India @ 15%

on gross basis as 'Fees for Included Services' as defined under Article

12(4)(b) of the DTAA.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


5.13. It is pleaded that this exercise amounts to double taxation of

the same income as :

5.13.1. Post the transfer pricing regime the problems of attribution of

profits are to be resolved in a manner consistent with international tax

practice on the subject. Where the dealings are between two related

corporate entities, one overseas and one domestic, then the transactions

between them are subjected to the examination of "transfer pricing" in which

it is ascertained by the department that appropriate income is attributed to

the Indian entity for the Indian leg of operations and therefore the

appropriate amount of tax is collected in India.

5.13.2. If the approach of the Ld. AO and Ld. CIT (A) is followed, then

it would bring the following to tax in India:

a) part of the value of the transaction in the hands of the foreign

company on the principle of attribution; and

b) the same income in the hands of the subsidiary company (CIS)

by increasing the arms length value vis-a-vis the Indian company.

Thus the same income attributable to India may be taxed twice, once

in the hands of the parent company on the principle of attribution and

then in the hands of the subsidiary company on the arms length

principle.

5.13.3. It is submitted that conceptually the department cannot apply

transfer pricing principle which are designed to ensure that the entire income

attributable to Indian operations is taxed in the hands of the Indian entity on


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


the one hand and at the same time seek to tax a part of subsidiary's income in

the hands of the parent company on principles of attribution. This runs

contrary to established and recognized T.P. norms.

5.14. In this case, the Ld. TPO in the case of CIS (Indian subsidiary) has

scrutinized and examined all the international transactions undertaken

between CIS and Appellant and thereafter after confirmation by the DRP, an

adjustment of Rs. 31,21,61,763 has been made under section 92CA in the

assessment order by considering an arm's length mark-up of 22.61%.

The matter is presently pending before the Hon'ble ITAT. For affecting

the said transfer pricing adjustment, the Ld. TPO has determined this

margin with reference to entrepreneurial companies in India assuming all

normal business risks and has not allowed any adjustment/relief to CIS

on account of the fact that majority of risks are borne by CMG. Thus as

per the assessment order in the case of CIS, CIS should have earned a

revenue of approx Rs. 5,29,89,96,030 instead of RS.4,98,68,34,267.

5.15. Therefore, on one hand the profits of Rs. 43,10,86,460 have been

attributed to the alleged PE of the Appellant in India and on the other

hand transfer pricing adjustment of Rs. 31,21,61,763 has been made in

the hands of CIS. Thus the same income attributable to India would be

taxed twice, once in the hands of the parent company on the principle of

attribution and then in the hands of the subsidiary company on the arms

length principle.

5.16. The above pleadings make it is absolutely clear that even if any

adjustment has to be made, it can be made only to the assessable income

of CIS.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


PeopleSoft license cost and maintenance charges amounting

to Rs. 68,17,878 taxable as "Royalty" under the provisions of

section 9(1)(vi) of the Act and Article 12 of the DTAA

6. Ld counsel for the assessee made following submissions:

6.1. PeopleSoft License charges pertain to People Soft financial reporting

package (PeopleSoft) costs which help in improving the visibility, tracking,

and control with a single source of information that provides complete, real-

time reporting and reconciliation of operational and financial data.

PeopleSoft is a packaged enterprise application. Out of the total amount

incurred by the Appellant, a proportion of the license cost and maintenance

cost for PeopleSoft was allocated by CMG to CIS which was reimbursed by

CIS to CMG.

6.2. The Ld. AO in his order has held that the consideration received for

licensing of software was taxable as 'Royalty' in terms of section 9(1)(vi) of

the Act and Article 12 of the DTAA and accordingly taxed it @ 15% on

gross basis as per Article 12(2) of the DTAA without even bothering to

mention as to which particular clause in the definition would get attracted in

this case.

6.3. The Ld. CIT (A) relied on the decision of the Hon'ble Karnataka

High Court in the case of Samsung Electronics Co. Ltd. 203 Taxman 477

and Sunray Computers Pvt. Ltd. 204 Taxman 1 wherein it has been held that

there was a transfer of copyright and payment made for the import of

software was in the nature of royalty in terms of the definition of royalty

provided in the Act as well as the DTAA. The Ld. CIT (A) accordingly held

that the amount received by the Appellant for providing the 'PeopleSoft'


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


software was in the nature of Royalty and hence taxable.

6.4. Hon'ble Delhi High Court in the case of CIT vs. Industrial

Engineering Projects (P) Ltd. (202 ITR 1014) has held that

reimbursement of expenses can under no circumstances be regarded as

revenue receipt.

6.5. Under the DTAA, a perusal of the definition under Article 12(3) of

the DT AA shows that for a consideration to be treated as "Royalties", it

should be towards use of or the right to use of any of the aforementioned

rights. Payments for transaction where the rights acquired in relation to the

copyright are limited to those necessary to enable the user to operate the

program should be dealt with as commercial income in accordance with

Article 7 (Business Profits).

6.6. The Indian Courts (including the jurisdictional High Court have

been consistent in their approach in holding that purchase of software would

fall within the category of copyrighted article and not towards acquisition of

any copyright in the software and hence the consideration should not qualify

as Royalty. Reliance is placed on the decision rendered by the Delhi High

Court in the case of Director of Income Tax v. Ericsson A.B. (ITA No.

504/2007). Reliance is also placed on the following judgments wherein it

has been held that supply of computer software is sale of copyrighted article

and not copyright:

- Special Bench of Delhi Tribunal in the case of Motorola Inc. v. Dy.

CIT (96 TTJ 1)

- Infrasoft Limited vs. ACIT, Circle 2(2) (ITA No 847/Del/2008)


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


- Lucent Technologies International Inc. vs DCIT (120 TTJ 929)

(Delhi)

- LotUS Development Asia Pacific Limited Corporation (ITA No. 564

to 566/Delj05) (Delhi)

- Sonata Information Technology Ltd. vs DCIT (2006) (7 SOT 465)

(Mum.)

- Sonata Software Ltd. vs. ITO (Int. Tax) (2006) (6 SOT 700) (Bang)

- Samsung Electronics Co. Ltd vs. ITO (TDS-1)(2005) (93 TTJ 65)

(Bang)

- Hewlett - Packard (India) (P) Ltd. vs. ITO (2006) (5 SOT 660)(Bang)

- Metpath Software International Limited (ITA No 179) (Delhi)

- Velankani Mauritius Ltd. (2010-TII-64-ITAT-BANG-INTL)

- M/s Tata Communications Ltd (2010-TII-157-ITAT-MUM- INTL)

- DDIT vs. Reliance Industries Ltd (2010-TII-154-ITAT-MUM- INTL)

- Allianz SE vs. ADIT (TS-204-ITAT-2012-Pune)

- Solid Works Corporation (TS-76-ITAT-2012-Mumbai)

6.7. In the recent decisions of the Mumbai Tribunal in the case of Solid

Works Corporation and the Pune Tribunal in the case of Allianz SE, the

ITAT has followed the decision of the Hon'ble Delhi High Court in Ericsson

A.B. instead of the Hon'ble Karnataka High Court in the case of Samsung

Electronics Co. Ltd. stating that when two views are available on an issue

one favourable to the assessee and the one against the assessee, the view

which is favourable to the assessee and does not support levy of tax on the

assessee should be preferred.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


6.8. It is pointed out that even though the Finance Act, 2012 has made

an amendment in section 9(1)(vi) of the Act and widened its scope, however,

the same does not impact the provisions of DTAA in any manner.

6.9. In this regard, reliance is placed on the recent judgment of ITAT

Mumbai, in the case of B4U International Holding (ITA No

3326/Mum/2006), wherein the Hon'ble Tribunal has observed that:

“Coming to the argument of the Ld Departmental Representative

that the amendment to Finance Act 2012 changes the position, we

find that there is no change in the DTAA between India and USA.

Thus the amendment has no affect on our decision”.

6.10. Ld. Counsel contends that from above, it follows that:

(a) the payment made by CIS to CMG cannot be characterized as

Royalty either under the Act or under the DTAA.

(b) Link charges amounting to Rs. 5,32,82,192 as ‘Royalty’

under Article 12(2) of the DTAA

(c) The link charges pertain to leased lines (under sea cables) that

allow a dedicated capacity for a private, secure communication

link from India to the US which enables CIS to communicate with

the customer. The Appellant makes payment for such link charges

to telecom service providers in the USA and cross charges the

portion of the cost incurred by it in connection with the India half

link to CIS, which is accordingly reimbursed by CIS to CMG.

6.11. The Ld AO in his order made an addition on account of link

charges by stating that they were taxable as 'Equipment Royalty' in terms of

Article 12(2) read with Article 12(3)(b) of the DTAA and accordingly taxed


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


it @ 10% on gross basis.

6.12. CMG/CIS, who availed the services from the service providers,

have neither intended to nor have obtained any right to use the underlying

infrastructure maintained and used by the service providers for providing

the services. The Indian judiciary has made it clear that it is important to

see whether there was any intention to transfer the right to use or not. In

the present set of facts, CMG/CIS do not have any control or possession

over the equipment i.e. the network facilities are under the control of and

maintained and operated by the service providers. CMG/CIS merely

avail a service. Accordingly, the link charges do not qualify as

'Equipment Royalty' in terms of Article 12 of the DTAA and hence are

not taxable in India. Reliance is placed on the following judgments:

• Bharat Sanchar Nigam Ltd. vs. Union of India (282 ITR 273)

(SC)

• Dell International Services India Pvt. Ltd. (AAR No. 735 of

2006)

• Cable & Wireless Networks India Private Limited (AAR No.

786 of 2008) - The Special Leave Petition filed against this

ruling has been dismissed by the Supreme Court

• Asia Satellite Telecommunications Co. Ltd. (332 ITR 340)

(Delhi High Court)

• Yahoo India Pvt Ltd. Vs DCIT [ITA No. 506/Mum/2008]

• Standard Chartered Bank V s Dy. Director of Income Tax

[ITA No. 3824/MUM/2006]

6.13. The Ld. CIT (A) in his order has accepted the contention of the

Appellant that the third party service provider was merely using its own

equipment itself while rendering the services to its customers including the

Appellant and CIS and there is no transfer of the right to use, either to the


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


Appellant or CIS. The Appellant has merely procured services and provided

the same to CIS and no part of the equipment was leased out to CIS. The Ld

CIT (A) held that the payment for link charges do not constitute Royalty

under the provisions of Article 12 of the DTAA.

6.14. The provisions of Equipment Royalty are also contained in

Explanation 2(iva) of section 9(1)(vi) of the Income Tax Act, 1961 ('Act')

which is similar to the provisions of Article 12(3)(b) of DTAA. Recently,

there has been an amendment in section 9(1)(vi) of the Act which though

dilutes the concept of control or possession in respect of any right, property

or information and has widened its scope, however, the same does not

impact the provisions of DTAA in any manner and has no effect on

assessee’s case.

6.15. It is further submitted that though Asia Satellite (supra) is a decision

on the domestic law but also makes an observation regarding DTAA. In para

74 of the judgment, it is specifically mentioned that" Even when we look

into the matter from the standpoint of Double Taxation Avoidance

Agreement (DTAA), the case of the appellant gets a boost". This

observation supports assessee’s cse.

6.16. In the case of B4YoU holding (supra), the Mumbai ITAT has held

that transponder hire charges are mere payment for rendering a service. In

this regard, the Mumbai ITAT has relied on the judgment of Madras High

Court in the case of Skycell Communications Ltd. (251 ITR 53).

6.17. In the facts and circumstances of the instant case, it is pleaded by ld.

counsel that assessee’s case is to be decided on the basis of the provisions of


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


the DTAA and accordingly the link charges are not taxable as Equipment

Royalty in view of Article 12 of DTAA. In addition, as already mentioned

above, reimbursement of expenses can under no circumstances be regarded

as revenue receipt. Accordingly, as payment for link charges pertains to

reimbursement of expenses, it would also not be taxable under section

9(i)(vi) of the Act.

D. Levy of Interest under section 234B and 234D and

withdrawal of interest under section 244A

7. The Ground no. 6 of the ITA No. 1443/DEL-2012 is as under:

“That the Ld. CI'T (Appeals) erred on facts and in law in

upholding levy of interest under sections 234B and 234D

of the Act and withdrawal of interest under section 244A

of the Act”.

7.1. The Ld CIT (A) in his order has held that except for the payment

with regard to PeopleSoft charges made by CIS, the income of CMG was

not liable for withholding under section 195 of the Act and therefore CMG

as liable to pay advance tax on its business income (i.e. profits attributed to

PE) and consequentially liable to pay interest under section 234B of the Act.

7.2. The Ld. CIT (A)erred in upholding the levy of interest under section

234B of the Act without appreciating that the entire payment was tax

deductible under section 195 of the Act. (though tax not deducted for

reasons mentioned above).

7.3. Section 195 of the Act does not make any distinction between

business income or royalty income for the purpose of tax withholding

provided the income is taxable in India.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


7.4. Section 209(1) (d) of the Act provides that "the Income tax

calculated shall be reduced by the amount of income tax which is tax

deductible at source ... " and when the entire income is tax deductible

(assuming to be taxable) the Appellant cannot be held to have committed

any default in paying advance tax.

7.5. Further, the issue of levy of interest under section 234B in such

cases is already covered by the following decisions:

a) DIT vs. Jacabs Civil Inc. [ITA 491 of 2008] [Del.]

b) Motorola Inc. vs. DCIT 96 TTJ 1 Delhi Spl. Bench];

c) DIT vs. NGC Network Asia LLC 313 ITR 187 [Born.];

d. CIT vs Sedco Forex International Drilling Co. Ltd. 264

ITR 320 [Uttaranchal]

In view of the above position of law, the levy of interest under

section 234B deserves to be quashed.

7.6. In the present case, no interest has been granted to the Appellant

under section 244A of the Act as the Appellant has till date not received

either the intimation under section 143(1) of the Act or the refund

claimed by it in its tax return. Accordingly there is no question of

withdrawing interest under section 244A or levying interest under

section 234D of the Act.

8. Ld. CIT(DR) Shri D.K. Gupta supported the order of ld. AO /TPO as

under:


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


8.1. On the issue of P.E. it is contended that assessee has a PE in India

looking at interlinking and interlacing of CIS and CMG. This is further

supported by the decision of the Hon’ble Delhi High Court in the assessee’s

case for A.Ys. 2002-03 & 2004-05 reported in 2012-TII-73-HC-DEL-INTL.

The Hon’ble Court while upholding the validity of the notices issued u/s 148

of the Act has held that the facts of the case prima facie indicated that apart

from the prima facie existence of a business connection there was also

material to entertain the belief that Convergys India was a permanent

establishment of the assessee. Orders of AO, CIT(A) and DRP are relied on.

8.2. Apropos attribution of profits to PE, assessing officer has given

adequate, tenable and reasonable basis. The assessee was neither able to

produce full details of revenue nor the expense could be fully verified by

AO.

8.3. Apropos people soft license charges order of TPO is relied on.

8.4. Apropos IPLC/ Link charges it is pleaded that the decision of the

Hon’ble Delhi High court relied by the ld. AR in the case of Asia Satellite is

no longer applicable as subsequent to this decision section 9 of the I.,T Act

(‘Act’) has been amended by the Finance Act, 2012 whereby Explanations 5

and 6 have been inserted with retrospective effect from 1-6-1976. The

Hon’ble High Court had decided the issue against the department mainly on

the ground:-

(a) The payments were made by non-resident to non-residents.

(b) The control of transponder/ equipment was in possession of the

payee i.e. the satellite owner and not with the payer (telecasting

company);

(c) No ‘process’ was involved.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


8.4.1. After the insertion of Explanation 5 & 6 for the purposes of treating a

payment as royalty within the meaning of section 9(1)(vi) of the Act it is not

necessary that the ‘control’ should be with the payer. It has also been

clarified that ‘process’ includes transmission by cable etc. Moreover, in the

present case payments are from resident to non-resident. This being the

position the Delhi High Court’s decision is no more applicable. On the

contrary the Special Bench decision of ITAT, Delhi in the case of New Skies

Satellites (2009-TII-77-ITAT-DEL-SB-INTL) has now revived and hence is

applicable. In the aforesaid decision after considering the meaning of

‘process’ and ‘control’ the ITAT has decided the issue in favour of the

department. It is held that such payments are taxable as royalty both under

the domestic law [section 9(1)(vi) and under article 12 of the DTAA.

8.4.2. The decision of ITAT, Mumbai in the case of B4U is distinguishable

as in this case the main issue involved was whether disallowance can be

made u/s 40(a)(i) on the payments made by the assessee to the Satellite

owner. One of the grounds on which the issue was decided in favour of the

assessee was that in view of the Delhi High Court’s decision in the case of

Asia Satellite (supra) such payment was not royalty. When the attention was

drawn towards the above mentioned retrospective amendments in section 9

the ITAT in para 17 of the order merely stated that there was no change in

the DTAA between India and the USA and hence amendments had no effect.

It is submitted that there is no necessity for any change in the DTAA as the

payments even before the amendments were royalty under article 12 of the

DTAA. The Hon’ble Delhi High Court had decided the issue against the

department under the domestic law. In fact, in the case before the High

Court there as no DTAA with the concerned country (Hongkong) at the

relevant time and the issue was being examined under the domestic law.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


Now since the payment is taxable under the domestic law after the

amendment, the same is liable to be taxed both under the domestic law as

well as under the DTAA.

8.4.3. The term ‘process’ has not been defined in the DTAA. Thus in view

of article 3(2) of the Treaty its meaning has to be seen under the domestic

law. Sine after the retrospective amendment the term ‘process’ has now been

defined in Explanation 6 to section 9(1)(iv) the same has to be considered

while examining the payment as royalty under article 12 of the DTAA.

8.4.4. The assessee’s reliance on the Hon’ble Delhi High Court’s decision in

the case of Nokia is misplaced as in the aforesaid case the issue involved

was about the payment made for the use of software. The Hon’ble High

Court decided the issue mainly on the ground that the software was

embedded in hardware. It was also held that the payment was for a

copyrighted article and hence was not covered in the definition of royalty

under Article 12 of the DTAA. It was in this context it was observed that

retrospective amendment in the Act by inserting Explanation 4 in sec.

9(1)(vi) would not change the position as there was no change in the Treaty.

In the present case, as discussed above, there is no need for any change in

the Treaty. Hence, in my humble view, the relied decision is of no help to

the assessee.

8.4.5. Reliance is also placed on the AAR’s decision in the case of Dishnet

Wireless Ltd., Chennai (2012/TII-47-ARA-INTL). In the aforesaid decision

not only the AAR has considered the aspect of reimbursement of expenses

but has also held that after the above amendments payments for such leased

lines are in the nature of royalty both under the Income Tax Act and under

Article 12 of the DTAA.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


8.4.6. It is submitted that the IPLC changes are taxable as royalty both under

the domestic law as well as under the DTAA.

8.5. Apropos interest u/s 234B & D and interest u/s 244A, assessing

officer’s order is relied.

9. We have heard the rival contentions and perused the material

available on record and proceed to decide various issues/ grounds as under:

9.1. On the issue of PE, AO held that the assessee has a Fixed Place PE in

India in terms of Article 5(1) and Article 5(2) of the DTAA on the basis of

the following:

(i) Employees seconded by CMG to CIS and the visiting

employees of CMG had a fixed place of business at their

disposal in the form of the facilities and premises of CIS.

(ii) Seconded employees of CMG to CIS were working on key

positions such as Country Head and Managing Director of CIS.

(iii) CMG has borne revenue expenses incurred for setting up of

various call sites (pre-operative expenses), capital costs were

borne by CIS itself.

(iv) CMG has provided free of cost assets in India for use of CIS.

(v) CMG has provided free of cost access to gateways,

communication lines etc outside India to CIS.

(vi) CMG has provided free of cost software to CIS for its use.

9.2. AO was of the opinion that CIS was not an agent of Independent

status within the meaning of Article 5(5) of the DTAA because the activities

of CIS are wholly on behalf of the assessee and the transactions between CIS

and the assessee are not made under arm’s length conditions. The Ld. AO


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


also alleged that the assessee has a PE under paragraph 4(a) and 4(c) of

Article 5 of the DTAA as the sales team of CIS assists CMG in the sales and

marketing efforts.

9.3. The Ld. CIT (A) in his order has upheld. that the assessee has a Fixed

Place PE in India in terms of Article 5(1) of the DTAA by stating that the

premises of CIS were at the disposal of CMG and the business of CMG was

carried on from such place. The Ld. CIT (A) made the following assertions

in this regard:

(v) CIS did not have either economic independence or functional

independence in relation to functions carried on by it due to the

following:

a. entire pre-operative expenses for setting up the call centre

sites for CIS were borne by the Appellant,

b. entire capital was provided to CIS in the form of share

capital/loan by the assessee to start its operation in India,

c. CMG exercised substantial control and influence in the

functional matters as is evident from the frequent and

extensive visits of assessee’s employees to India,

secondment of assessee’s employees to the key position in

CIS,

d. CIS did not bear any substantial risk in relation to the

functions carried out by in India and,

e. Deployment of certain assets (hardware and software)

without charging any cost.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


(vi) Management of risk related to delivery of services was carried

out in India by CMG through its employees visiting India on

frequent basis or secondment of its employees on key positions

in CIS.

(vii) The entrepreneurial services were performed in India by CMG

through the frequent visits of its employees to provide

supervision, direction and control over the operations of CIS

and such employees had a fixed place of business at their

disposal.

9.4. The Ld. CIT (A) has also held. that the assessee had a place of

management in India under Article 5(2)(a) of the DTAA. With regard to the

dependant agent PE, the Ld. CIT (A) has however held. that the assessee

does not have a Dependent Agent PE in India as none on the conditions

mention in Article 5(4) are met.

9.5. It was contended before us that the above finding given by the

CIT(A) are not sustainable both on facts and in law. In this regard the ld.

AR of the assessee submitted a point-wise reply to the allegations given

by AO /CIT(A) holding that the assessee has a fixed place PE in India in

terms of Article 5(1) and 5(2) of the DTAA, which is placed on record.

Submissions as raised before assessing officer and CIT(A) are relied on.

9.6. Shri Pawan Kumar, counsel for the assessee has canvassed legal

arguments relying on the case laws and the OECD Commentary that the

assessee could. not be said to have a PE in terms of Article 5(1) and 5(2)

of the DTAA. It is argued that assessee was merely engaged in procuring


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


services from India and would. therefore fall within the exclusionary

clause of Article 5(3) of the DTAA which excludes “the maintenance of a

fixed place of business solely for the purpose of purchasing goods or

merchandise, or of collecting information, for the foreign enterprise” from

being regarded as PE. It was further submitted that even if it is presumed

that a business connection or a PE exists, even then procurement of

services from the Indian subsidiary which is a 10A unit is akin to

purchasing goods or merchandise. Therefore, Assessee is covered under

clause (b) of Explanation 1 of sub-section (1) of section 9 of the Act read

with article 7(4) of the DTAA. In this regard, the ld. AR of the assessee

relied on the decision of the Hon’ble Supreme Court in the case of CIT vs.

B. Suresh (313 ITR 149) (SC) wherein the Apex Court observed that

today the difference between “goods” and “services” is getting blurred

with the globalization and cross-border transactions. Accordingly, with

technological advancement one has to change our thinking regarding

concepts like goods, merchandise and articles.

9.7. The ld. CIT DR in reply submitted that the judgment of the Hon’ble

Supreme Court in the case of B. Suresh (supra) was in connection with

claiming of deduction under section 80HHC and the same cannot be

applied in the present case. We are in agreement with the ld. CIT DR and

reject the above contention of the assessee.

9.8. Looking at the entirety of facts and circumstances, we are of the

view that the Ld. CIT (A)’s order on the proposition of PE deserves to be

upheld. The employees of the assessee frequently visited the premises of

CIS to provide supervision, direction and control over the operations of


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


CIS and such employees had a fixed place of business at their disposal.

CIS was practically the projection of assessee’s business in India and

carried out its business under the control and guidance of the assessee and

without assuming any significant risk in relation to such functions.

Besides assessee has also provided certain hardware and software assets

on free of cost basis to CIS. Thus, the findings of the CIT(A) that assessee

has a fixed place PE in India under Article 5(1) of the DTAA is upheld.

10. Apropos the dependent agent PE in terms of Article 5(4) and 5(5) of

the DTAA, after hearing the rival contentions, we do not find any

infirmity in the order of the ld. CIT(A) and hold that CIS did not

constitute a dependent agent PE of the assessee in India as the conditions

provided in paragraph 4 of Article 5 of the DTAA are not satisfied. The

grounds of appeal taken by the assessee and the department in connection

with the PE are accordingly disposed off.

11. Attribution of profits to the PE

11.1. We now come to the issue of attribution of profits to the PE in

India. In the assessment order for the assessment year 2006-07 the Ld.

AO adopted a head count basis for attributing profits of Rs.

2,84,45,67,544 by allocating revenue and expenses (excluding direct

expenses) in proportion of number of employees. The computation made

by the Ld. AO is reproduced in para 5.2 above.

11.2. While coming to the above computation the AO estimated

assessee’s revenue at USD 272.49 million (INR 12,15,81,77,391) against


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


the actual revenue of USD 138.9 million (INR 6,19,73,70,748). In appeal

before the ld. CIT(A), the assessee submitted the relevant documentation as

additional evidence in respect of the actual revenue from end customer with

regard to contracts/projects wherein services were procured from CIS and

for which opportunity was also given to the Ld AO. It is pertinent to

mention that in the assessment of preceding and the subsequent years, the

Ld. AO has accepted the end customer revenue based upon the

methodology accepted by the ld. CIT(A) in assessment year 2006-07.

Thus, AO himself accepted the actual revenue method in preceding and

subsequent assessments.

11.3. It is not disputed that the details of aggregate customer revenue from

the work subcontracted to CIS and estimated operating income of the

assessee with respect to such revenue were submitted before the AO. The

operating income was computed considering the global operating income

percentage of the customer care business i.e. 10.55%. This percentage has

been derived from the filings made by the assessee company with the

Securities and Exchange Commission of USA. This has been explained in

tabular format in the foregoing paragraphs.

11.4. The CIT (A) accepted the revenue from end-customer with regard

to contracts/projects wherein services were procured from CIS of USD

138.9 million submitted by the assessee and reduced the attribution of

profits to Rs. 43,10,86,460 to the PE of the assessee. In determining the

profits, the ld. CIT (A) allowed deduction only for a part of the expenses.

The computation of profits made by the CIT(A) is tabulated in para 5.7

above.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


11.5. In the assessment order for the assessment year 2008-09, the AO

accepted the end customer revenue submitted by the assessee and

computed the profits attributable to the PE as under:

Description Amount

(USD)

Amount

(Rs.)

Revenue from the Indian operations [A] 18,46,00,000

Less: Amount of service fee paid to CIS

(including mark-up) [B]

16,79,67,139

Balance [C] = A – B 1,66,32,861

Less: 5% of C in terms of section 44C of the

Act [D]

8,31,643

Balance [E = C – D] 1,58,01,218

Profits attributable to India [72.89% of E] 1,15,17,508 45,51,71,917

11.6. The above attribution of profits to the PE of the assessee in India in

the assessment year 2008-09 was confirmed by the DRP.

11.7. The fundamental difference between the computation submitted by

the assessee for assessment year 2006-07 and as adopted by AO lies at the

starting point of the computation itself i.e. the revenue which was considered

on the basis of head count instead of the amount submitted by the Assessee

i.e. USD 138.9 million representing the revenue from end customers with

regard to contracts/projects wherein services were procured from CIS for FY

2005-06. If the methodology adopted by the AO is followed by taking the

revenue of USD 138.9 million as the starting point, it will result in a loss in

the hands of the alleged PE as explained in para 5.4.

11.8. The revenue as accepted by the CIT (A) at USD 138.9 million and if

the methodology as adopted by the AO is followed it would result in a loss

in the hands of the alleged PE.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


11.9. In view of the CBDT Circular No. 5 of 2004 as well as the judgment

of the Supreme Court in Morgan Stanley (292 ITR 416), the Bombay High

Court in Set Satellite (Singapore) Pte Ltd. (307 ITR 205), jurisdictional High

Court in Rolls Royce Singapore Pvt. Ltd. (202 Taxman 45) (Del.), Director

of Income Tax vs. BBC Worldwide Ltd. (203 Taxman 554) (Del.) and the

OECD Guidelines, this issue is to be examined. An overall attribution of

Profits to the Permanent Establishment is a transfer pricing issue and no

further profits can be attributed to a PE once an arm's length price has been

determined for the Indian associated enterprise, which subsumes the

functions, assets and risk profile of the alleged PE. In this case 81% revenue

has been transferred to the India Subsidiary in the assessment year 2006-07.

For the assessment year 2008-09 this percentage comes to 90%.

11.10. AO in his order for assessment year 2006-07 has attributed a weight

age of 72.77% to the delivery part which is the work done in India. Even if

the attribution to the alleged PE is made by applying said weight age on end-

customer revenue, no further attribution will be required in the hands of the

alleged PE.

11.11. Assessee in compliance with the CBDT Circular No. 5 of 2004,

placed on record submitted the Transfer Pricing Analysis report for Profit

Attribution before the CIT(A), who forwarded the copy of the report and

also proper opportunity of hearing to AO.

11.12. Ld. CIT(A) has accepted that to the extent of functions, assets and

risks are already captured in the transfer pricing analysis of CIS, no further

profits can be attributed to such functions, assets and risks in the hands of


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


assessee’s PE, but held that further profit was required to be attributed on

account of the following:

(i) Certain assets were deployed by the Assessee in India;

(ii) entrepreneurial services to manage risk related to the service

delivery were performed in India by the Assessee.

11.13. In our considered view the observations of the CIT(A) that further

attribution is required to be made on account of the entrepreneurial services

to manage risk related to the service delivery performed in India by CMG is

completely without any basis and no attribution on these facts is required to

be made on these issues. The risk is outside India with CMG since the Indian

Company (CIS) is remunerated at Cost+14% irrespective of failure of

service delivery. Even otherwise, no attributions can be made on account of

risks in terms of paragraph 5 of Article 7 of the DTAA. The assessee

submitted that the contention of the Ld. CIT (A) that the entrepreneurial

services to manage risk related to service delivery were performed in India

by the assessee through the employees of CMG visiting India on frequent

basis or secondment of employees of CMG on key positions in CIS is

factually incorrect. The Ld. CIT (A) himself in his order at para 8.7 has held.

that the technical and consultancy services rendered by employees of CMG

were in the nature of included/technical services. The

employees/representatives of CMG visited India for short duration and for

providing training under the Technical services Agreement. Further, the

seconded personnel were employees of CIS working under its control and


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


supervision and not the employees of CMG. It cannot be said that they were

performing any entrepreneurial services to manage risk in India.

11.14. The AO/ CIT (A) for arriving at the revenue of the alleged PE

of the assessee has taken the revenue of the assessee company (CMG as a

multi-national enterprise) as the starting point. Hence, the LD. AO/ld.

CIT(A) ought to have considered the expenses incurred outside India for

arriving at the profit of the assessee company with regard to the contracts

wherein services have been procured from CIS. The above expenses have

been incurred for carrying on the business of the assessee company

outside India and are not related to the PE of the assessee in India. While

computing the profit of CMG as a multi-national enterprise, there is no

question of applying the provisions of the Act. The expenses incurred

outside India have been incurred by CMG for its business outside India

and not by the alleged PE. Hence, the AO/ CIT(A) erred in invoking the

provisions of section 44C of the Act in attributing the income of the

assessee company without allowing the cost incurred to earn the revenue

outside India thereby attributing the entire receipts. The AO erred in not

allowing the deduction of the cost allocated to earn the Indian revenues by

interalia, invoking the provisions of section 40(a)(i) and 44C of the Act

without appreciating the provisions of Article 7(3) of the DTAA. What is

stipulated and stated in paragraph 3 of Article 7 is that the expenses

incurred by the assessee for the purposes of the business of the PE can be

claimed as a deduction but only in accordance with and subject to

limitation prescribed in the Act. Second part of paragraph 3 to Article 7

protects and states that the assessee is entitled to claim deduction both in

India as well as administrative and general expenses whether they are


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


incurred in India in which PE is alleged or outside India. In nutshell for

the purpose of computing the taxable profits attributable to the alleged

PE, even the executive and general expenses are allowable. The action of

the lower authority order in invoking section 40(a)(i) in respect of all

expenses incurred by CMG as a multi-national enterprise is not in

accordance with Para 3 of Article 7 of the DTAA.

11.15. The submissions of both parties for assessment year 2008-

09 are broadly same as the facts of assessment year 2008-09 are similar to

assessment year 2006-07.

11.16. It will be desirable to reproduce Article 7 of the DTAA for arriving at

the methodology for attributing profits to the PE of the assessee in India.

“ARTICLE 7 Business Profits

1. The profits of an enterprise of a Contracting State shall be

taxable only in that State unless the enterprise carries on

business in the other Contracting State through a permanent

establishment situated therein. If the enterprise carries on

business as aforesaid, the profits of the enterprise may be taxed

in the other State but only so much of them as is attributable to

(a) that permanent establishment; (b) sales in the other State of

goods or merchandise of the same or similar kind as those sold.

through that permanent establishment ; or (c) other business

activities carried on in the other State of the same or similar

kind as those effected through that permanent establishment.

2. Subject to the provisions of paragraph 3, where an enterprise

of a Contracting State carries on business in the other

Contracting State through a permanent establishment situated

therein, there shall in each Contracting State be attributed to

that permanent establishment the profits which it might be


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


expected to make if it were a distinct and independent

enterprise engaged in the same or similar activities under the

same or similar conditions and dealing wholly at arm’s length

with the enterprise of which it is a permanent establishment and

other enterprises controlling, controlled by or subject to the

same common control as that enterprise. In any case where the

correct amount of profits attributable to a permanent

establishment is incapable of determination or the

determination thereof presents exceptional difficulties, the

profits attributable to the permanent establishment may be

estimated on a reasonable basis. The estimate adopted shall,

however, be such that the result shall be in accordance with the

principles contained in this Article.

3. In the determination of the profits of a permanent

establishment, there shall be allowed as deductions expenses

which are incurred for the purposes of the business of the

permanent establishment, including a reasonable allocation of

executive and general administrative expenses, research and

development expenses, interest, and other expenses incurred for

the purposes of the enterprise as a whole (or the part thereof

which includes the permanent establishment), whether incurred

in the State in which the permanent establishment is situated or

elsewhere, in accordance with the provisions of and subject to

the limitations of the taxation laws of that State. However, no

such deduction shall be allowed in respect of amounts, if any,

paid (otherwise than towards reimbursement of actual

expenses) by the permanent establishment to the head office of

the enterprise or any of its other offices, by way of royalties,

fees or other similar payments in return for the use of patents,

know-how or other rights, or by way of commission or other

charges for specific services performed or for management, or,

except in the case of a banking enterprises, by way of interest

on moneys lent to the permanent establishment. Likewise, no

account shall be taken, in the determination of the profits of a

permanent establishment, for amounts charged (otherwise than

toward reimbursement of actual expenses), by the permanent

establishment to the head office of the enterprise or any of its

other offices, by way of royalties, fees or other similar

payments in return for the use of patents, know-how or other


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


rights, or by way of commission or other charges for specific

services performed or for management, or, except in the case of

a banking enterprise, by way of interest on moneys lent to the

head office of the enterprise or any of its other offices.

11.17. In view of the above facts, circumstances, case law, CBDT circulars

and various articles of India-USA DTAA, following conclusions are arrived

at:

A. The Ld. CIT (A) accepted the revenue from end-customer with

regard to contracts/projects wherein services were procured from

CIS of USD 138.9 million submitted by the assessee for

assessment year 2006-07. The end customer revenue has been

accepted by the AO is the assessment of all the other years on the

same basis.

B. The methodology adopted by the AO and the ld. CIT(A) cannot be

accepted as they have considered revenue of the assessee company

(CMG as a multi-national enterprise) as the starting point for

arriving at the profits attributable to the PE of assessee in India. The

revenue of the assessee company cannot be considered as the revenue

of the PE by any stretch of imagination. Furthermore the expenses

incurred outside India are linked with the business activities of the

assessee undertaken outside India for the functions performed outside

India and are not linked to the PE of the assessee in India.

C. The attribution of profits to the PE should be made by the transfer

pricing principles supported by the CBDT Circular No. 5 of 2004 as


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


well as the judgment of the Supreme Court in Morgan Stanley (292

ITR 416). As per the Supreme Court in the case of Morgan Stanley, it

has been held. as under:

“The impugned ruling is correct in principle insofar as an

associated enterprise, that also constitutes a PE, has been

remunerated on an arm’s length basis taking into account all

the risk-taking functions of the enterprise. In such cases nothing

further would. be left to be attributed to the PE. The situation

would. be different if transfer pricing analysis does not

adequately reflect the functions performed and the risks

assumed by the enterprise. In such a situation, there would. be

a need to attribute profits to the PE for those functions/risks

that have not been considered. Therefore, in each case the data

placed by the taxpayer has to be examined as to whether the

transfer pricing analysis placed by the taxpayer is exhaustive of

attribution of profits and that would. depend on the functional

and factual analysis to be undertaken in each case. Lastly, it

may be added that taxing corporates on the basis of the concept

of economic nexus is an important feature of attributable profits

(profits attributable to the PE).”

The application of transfer pricing principles is also supported by the

decisions of the Bombay High Court in Set Satellite (Singapore) Pte

Ltd. (307 ITR 205), jurisdictional High Court in Rolls Royce

Singapore Pvt. Ltd. (202 Taxman 45) (Del.), Director of Income Tax

vs. BBC Worldwide Ltd. (203 Taxman 554) (Del.)

D. The ld. CIT (A) has held. that further profit was required to be

attributed on account of Assets provided by the assessee to CIS and

management of risk by the assessee in India. In our view no

attribution of profits can be made on account of management of risk

as risk resides outside India. Even otherwise the charge for the


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


employees seconded to CIS and employees visiting India to provide

the technical services is subsumed in the transfer pricing analysis of

CIS. Therefore, attribution can only be made on account of free of

cost assets and software’s provided by the assessee to CIS.

E. The assessee has submitted that it does not prepare India specific

accounts, therefore the attribution of profits on the basis as disclosed

in the transfer pricing study for assets and software cannot be

accepted. Further, in the facts and circumstances of the case Profit

Split method is not the correct method for attribution of profits to the

PE of the assessee in India.

F. In our considered opinion, the correct approach to arrive at the profits

attributable to the PE should. be as under:

Step 1: Compute Global operating Income percentage of the customer

care business as per annual report/10K of the company.

Step 2: This percentage should. be applied to the end-customer

revenue with regard to contracts/projects where services were

procured from CIS. The amount arrived at is the Operating Income

from Indian operations.

Step 3: The operating income from India operations is to be reduced

by the profit before tax of CIS. This residual is now attributable

between US and India


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


Step 4: The profit attributable to the PE should be estimated on

residual profits as determined under Step 3 above. The attribution

of India profit shall be worked out as under, mentioned after the

table:

11.18. In the computation based on the above approach for the

assessment year 2006-07, the profits attributable to India comes as under:

Particulars Amount (in

USD)

Total Revenue of CMG as per the Annual Report (A)

1,663,600,000

Operating Income of CMG as per the Annual Report

(B)

175,500,000

Operating Income as a percentage of revenue earned

(C = B/A)

10.55%

End-customer revenue from Indian operations (D) 138,900,000

Operating Income from Indian operations (E = C * D) 14,653,950

Operating Income of CIS (Profit before tax of CIS)

(F)

13,800,000

Profit retained by CMG in the US (G = E – F)

Placitum ‘X’

853,950

11.19. As per this working, the worldwide profit earned by CMG for

A.Y. 2006-07 comes to USD 853950. This by and large tallies with the

submission of the assessee dated 26-12-2010 to the assessing officer in

which it has been submitted that the approximate operating profits of

CMG in USD come to 0.8 million. Now the important question that arises

is as to how much of the profits shall be attributable to CMG’s Indian PE

over and above the profits declared by its subsidiary CIS.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


11.20. Apropos TPO’s estimation, we are of the view that the same

is not justified as it involves a very unrealistic method of counting the

worldwide number of employees and dividing it with CMG’s global

revenue without considering the relevant aspects. The finer and material

aspects about the status, capacity of the employees are over looked and

result become very vague and distorted. Therefore, the method adopted by

assessing officer cannot be relied on as most appropriate method.

11.21. Apropos CIT(A)’s estimate about attribution, though he

accepted the proposition that there cannot be notional addition to India

revenue, however, CIT(A)’s method also does not become a rational

inasmuch as the various expenditures incurred by CMG i.e. research &

development, depreciation, amortization etc. have not been considered

and 50% of selling, general and administrative expenses have been

ignored along with other expenses incurred by CMG outside India for

earning the revenue from end customers. In our considered view, this

approach is also not viable and appropriate.

11.22. As the methods for calculating the attribution profit as

adopted by TPO and CIT(A) are not reliable. Ld. Counsel has further

demonstrated that if both the methods are harmoniously applied, this

leads to a situation where no further attribution to the assessee’s income

can be made. Thus a harmonious intermixed rationalization of TPO and

CIT(A) method results into no further attribution of profits to Indian PE.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


11.23. In this backdrop we are reminded of two case laws decided

by Hon’ble Supreme Court which have dealt with attribution of the

profits to the Indian PEs:

(i) Anglo French Textile Company Ltd. vs CIT 23 ITR 101 (SC), in

which 10% attribution ha been held to be reasonable.

(ii) Hukum Chand Mills Ltd. Vs. CIT 103 ITR 548 (SC), in which

15% attribution has been held to be reasonable.

11.24. These cases decided by the Apex Court though are old, but

they still hold the field as they have not been tinkered with. In our

considered view, the adoption of higher figure of 15% as held by Hon’ble

Supreme Court in the Hukum Chand Mills Ltd. (supra), for attribution of

assessee’s Indian PE operations will meet the ends of justice. Thus, the

attribution of Indian PE income should be made at 15% of profit retained

by CMG in the US.

11.25. In other words 15% of the placitum ‘X’ (result of G=E-F) in

the chart at para 11.18, as mentioned above as a reasonable attribution of

profit of India PE, will meet the ends of justice. Thus, assessing officer

will work out the profits attributable to Indian PE on this method for A.Y.

2006-07.

11.26. Following same profit attribution for assessment year 2008-

09 should be done also by this methodology. The grounds of appeal of the

assessee and the department in respect of profit attribution for A.Y. 2006-

07 and 2008-09 are accordingly disposed off.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


12. Apropos issue of taxability of PeopleSoft license cost and

maintenance charges which is in the nature of reimbursement of payments

for software financial reporting packages amounting to Rs. 68,17,878

taxable as “Royalty” under the provisions of section 9(1)(vi) of the Act

and Article 12 of the DTAA. This issue is in assessment year 2006-07

only. Assessee demonstrated that these charges pertain to PeopleSoft

financial reporting package (PeopleSoft) costs which help in improving

the visibility, tracking, and control with a single source of information

that provides complete, real-time reporting and reconciliation of

operational and financial data. PeopleSoft is a packaged enterprise

application. Out of the total amount incurred by the assessee, a proportion

of the license cost and maintenance cost for PeopleSoft was allocated by

CMG to CIS which was reimbursed by CIS to CMG. AO in order for

assessment year 2006-07 held that the consideration received for licensing

of software was taxable as ‘Royalty’ in terms of section 9(1)(vi) of the

Act and Article 12 of the DTAA and accordingly taxed it @15% on gross

basis as per Article 12(2) of the DTAA.

12.1. The Ld. CIT (A) relied on the decision of the Hon’ble Karnataka

High Court in the case of Samsung Electronics Co. Ltd. 203 Taxman 477

and Sunray Computers Pvt. Ltd. 204 Taxman 1 wherein it has been held.

that there was a transfer of copyright and payment made for the import of

software was in the nature of royalty in terms of the definition of royalty

provided in the Act as well as the DTAA and accordingly held. that the

amount received by the assessee for providing the ‘PeopleSoft’ software

was in the nature of Royalty and hence taxable.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


12.2. Assessee contended that the nature of payment for PeopleSoft

charges pertains to reimbursement of expenses, it would. not be taxable

under section 9(i)(vi) of the Act. Reliance is placed on the decision of the

Hon’ble Delhi High Court in the case of Expeditors International India (P)

Ltd. (209 Taxman 18) on reimbursement of common expenses incurred by

the parent company.

12.3. A perusal of the definition under Article 12(3) of the DTAA shows

that any payment in order to be treated as “Royalties”, should. be towards

use of or the right to use of any of the aforementioned rights. Payments

for transaction where the rights acquired in relation to the copyright are

limited to those necessary to enable the user to operate the program are to

be dealt with as commercial income in accordance with Article 7 i.e.

Business Profits.

12.4. Assessee placed reliance on the decision of Hon’ble Delhi High

Court in the case of Director of Income Tax v. Ericsson A.B. (ITA No.

504/2007) to contend that the jurisdictional High Court has held that

purchase of software would. fall within the category of copyrighted article

and not towards acquisition of any copyright in the software and hence

the consideration should. not qualify as Royalty. Further reliance is placed

on the following judgments, holding that supply of computer software is

sale of copyrighted article and not copyright:

• Special Bench of Delhi Tribunal in the case of Motorola Inc. v. Dy.

CIT (96 TTJ 1)


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


• Infrasoft Limited vs. ACIT, Circle 2(2) (ITA No 847 Delhi 2008)

(Delhi)

• Lucent Technologies International Inc. vs DCIT (120 TTJ 929)

(Delhi)

• LotUS Development Asia Pacific Limited Corporation (ITA No. 564

to 566/Del/05) (Delhi)

• Sonata Information Technology Ltd. vs DCIT (2006) (7 SOT 465)

(Mum.)

• Sonata Software Ltd. vs. ITO (Int. Tax) (2006) (6 SOT 700)(Bang)

• Samsung Electronics Co. Ltd vs. ITO (TDS-1)(2005) (93 TTJ 65)

(Bang)

• Hewlett – Packard (India) (P) Ltd vs. ITO (2006) (5 SOT

660)(Bang)

• Metpath Software International Limited (ITA No 179) (Delhi)

• Velankani Mauritius Ltd. (2010-TII-64-ITAT-BANG-INTL)

• M/s Tata Communications Ltd (2010-TII-157-ITAT-MUM-INTL)

• DDIT vs. Reliance Industries Ltd (2010-TII-154-ITAT-MUM-INTL)

• Allianz SE vs. ADIT (TS-204-ITAT-2012-Pune)

• Solid Works Corporation (TS-76-ITAT-2012-Mumbai)

12.5. In the recent decisions of the Mumbai Tribunal in the case of Solid

Works Corporation and the Pune Tribunal in the case of Allianz SE, the

ITAT have followed the decision of the Hon’ble Delhi High Court in

Ericsson A.B. instead of the Hon’ble Karnataka High Court in the case of


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


Samsung Electronics Co. Ltd. stating that when two views are available on

an issue one which is favourable to the assessee should be preferred.

12.6. Adverting to the issue of amendments brought in by Finance Act,

2012, we are of the view that even though the Finance Act, 2012 has

made an amendment in section 9(1)(vi) of the Act and widened its scope,

however, the same does not impact the provisions of DTAA in any

manner. In this regard, reliance placed on the recent judgment of ITAT

Mumbai, in the case of B4U International Holding (ITA No

3326/Mum/2006) and the Delhi High Court in the case of Nokia Networks

OY (ITA No 512 of 2007) is well placed. The Delhi High Court has held

as under:

“……… However, the above argument misses the vital point namely

the assessee has opted to be governed by the treaty and the language

of the said treaty differs from the amended Section 9 of the Act. It is

categorically held. in CIT v. Siemens Aktiongesellschaft, 310 ITR 320

(Bom) that the amendments cannot be read into the treaty. On the

wording of the treaty, we have already held. in Ericsson (supra) that a

copyrighted article does not fall within the purview of Royalty.

Therefore, we decide question of law No. 1 & 2 in favour of the

assessee and against the Revenue.”

12.7. After hearing both the parties and perusing the record and in view

of the judgment of jurisdiction High Court, we hold that the purchase of

software would fall within the category of copyrighted article and not

towards acquisition of any copyright in the software and hence the

consideration should. not qualify as Royalty. Even otherwise, the payment

is in the nature of reimbursement of expenses and accordingly not taxable

in the hands of the assessee. This ground is allowed to the assessee.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


13. Adverting to the issue of taxability of link charges as ‘Equipment

Royalty’ in terms of Article 12(2) read with Article 12(3)(b) of the

DTAA. This issue is common to both assessment year 2006-07 and 2008-

09. In this regard, the ld. AR of the assessee submitted that the link

charges pertain to leased lines (under sea cables) that allow a dedicated

capacity for a private, secure communication link from India to the US

which enables CIS to communicate with the customers. The assessee

makes payment for such link charges to telecom service providers in the

USA and cross charges the portion of the cost incurred by it in connection

with the India half link to CIS, which is accordingly reimbursed by CIS to

CMG. Ld. counsel also referred to the invoice of raised by the assessee on

CIS on Page 349 of paper book volume I and the basis of cross charged at

page 828 of paper book volume III and placed reliance on the decision of

the Hon’ble Delhi High Court in the case of Expeditors International India

(P) Ltd. (209 Taxman 18) on reimbursement of common expenses

incurred by the parent company.

13.1. AO made an addition on account of link charges by stating that they

were taxable as ‘Equipment Royalty’ in terms of Article 12(2) read with

Article 12(3)(b) of the DTAA and accordingly taxed it @ 10% on gross

basis. CMG/CIS, who availed the services from the service providers,

have neither intended to nor have obtained any right to use the underlying

infrastructure maintained and used by the service providers for providing

the services. It is important to see whether there was any intention to

transfer the right to use or not. In the present set of facts, CMG/CIS do

not have any control or possession over the equipment i.e. the network

facilities are under the control of and maintained and operated by the


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


service providers. CMG/CIS merely avail a service. Accordingly, we hold

that the link charges do not qualify as ‘Equipment Royalty’ in terms of

Article 12 of the DTAA and hence are not taxable in India. Useful can be

drawn from the following judgments:

• Bharat Sanchar Nigam Ltd. vs. Union of India (282 ITR 273) (SC)

• Dell International Services India Pvt. Ltd. (AAR No. 735 of 2006)

• Cable & Wireless Networks India Private Limited (AAR No. 786 of

2008) – (The Special Leave Petition filed against this ruling has

been dismissed by the Supreme Court)

• Asia Satellite Telecommunications Co. Ltd. (332 ITR 340) (Delhi

High Court)

• Yahoo India Pvt Ltd. Vs DCIT [ITA No. 506/Mum/2008]

• Standard Chartered Bank Vs Dy. Director of Income Tax [ITA No.

3824/MUM/2006]

13.2. CIT (A) in his order has accepted the contention of the assessee that

the third party service provider was merely using its own equipment itself

while rendering the services to its customers including the assessee and

CIS and there is no transfer of the right to use, either to the assessee or

CIS. The assessee has merely procured services and provided the same to

CIS and no part of the equipment was leased out to CIS. The Ld. CIT (A)

held that the payment for link charges do not constitute Royalty under the

provisions of Article 12 of the DTAA.

13.3. The provisions of Equipment Royalty are also contained in

Explanation 2(iva) of section 9(1)(vi) of the Income Tax Act, 1961

(‘Act’) which is similar to the provisions of Article 12(3)(b) of DTAA.


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


13.4. Besides, though Asia Satellite case is a decision on the domestic

law but also makes an observation regarding DTAA. In para 74 of the

judgment, it is specifically mentioned that “ Even when we look into the

matter from the standpoint of Double Taxation Avoidance Agreement

(DTAA), the case of the assessee gets a boost”. This observation supports

the case of assessee.

13.5. In view of the foregoing observations we hold that there is no

transfer of the right to use, either to the assessee or to CIS. The assessee

has merely procured a service and provided the same to CIS, no part of

equipment was leased out to CIS. Even otherwise, the payment is in the

nature of reimbursement of expenses and accordingly not taxable in the

hands of the assessee. Therefore, it is held. that the said payments do not

constitute Royalty under the provisions of Article 12 of the tax treaty and

the ground is allowed in favour of assessee.

14. Coming to the assessee’s ground about levy of interest under

section 234B, it is pleaded that the taxable income of the assessee was

liable to TDS, as the assessees are non-residents, therefore there was no

liability to pay advance tax as per the provisions of sec. 209(1) of the I.T.

Act and interest u/s 234B should. not be levied.

14.1. We have considered rival submissions and record. The charging of

interest is automatic under the Act if the assessee has defaulted in

payment of advance tax. The income of the assessee was not liable for

withholding tax under section 195 of the Act. In this case we have no

option but to hold. that the assessee is liable to interest u/s 234B, as the


ITA nos. 1443/D/12, 5243/D/11 & 1376/D/12


income being assessed now cannot be held. to be income liable to TDS

under Indian provisions. The same is being assessed in the hands of PEs

who had not filed their return on the ground that this income was not

attributed to Indian Business Connection. Provisions of section 234B are

mechanical in nature. In view of the above this ground of appeal of the

assessee is dismissed.

15. In the result, assessee’s appeals for A.Y. 2006-07 and 2008-09 are

partly allowed and that of revenue for A.Y. 2006-07 is dismissed.

Order pronounced in open court on 10-05-2013.

Sd/- Sd/-

( J.S. REDDY ) ( R.P. TOLANI )

ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 10-05-2013.

MP Copy to :

1. Assessee

2. AO

3. CIT

4. CIT(A)

5. DR


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